TIDMJMG
RNS Number : 7361N
JPMorgan Emerging Mkts Invest Trust
27 September 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EMERGING MARKETS INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEARED 30TH JUNE 2023
Legal Entity Identifier : 5493001VPQDYH1SSSR77
Information disclosed in accordance with the DTR 4.1.3
JPMorgan Emerging Markets Investment Trust plc (the 'Company')
has today announced its annual financial results for the period
ending 30th June 2023.
Highlights
-- Net asset value ('NAV') per share on a total return basis was
flat, whilst total returns to shareholders grew by 0.8%. The
Company outperformed its benchmark, the MSCI Emerging Markets
index, which fell 2.8%.
-- In the twenty years ended 30th June 2023, the Company has
generated annualised excess returns of 4.0% relative to its
benchmark.
-- A final dividend of 1.07 pence per share has been declared,
taking the total dividend for the full year to 1.65 pence per
share; a rise of 22.2 % compared to the previous year.
-- The share price discount to NAV narrowed slightly, ending at 9.7%, from 10.3%.
-- W ith effect from 1st July 2023, the Company's management fee
will be calculated on a tiered basis of 0.75% per annum on the
first GBP500 million of net assets, 0.65% on net assets between
GBP500 million and GBP1 billion, and 0.60% on net assets in excess
of GBP1 billion. This compares with the flat fee arrangement of
0.75% per annum on net assets which has been levied since 1st July
2021.
Aidan Lisser, Chair, commented:
"This has been an uncertain and volatile time for investors. The
Company has not been immune to this volatility, although it is
encouraging that performance was ahead of the benchmark. It is also
pleasing to note that long term performance continues to be
extremely robust, in both outright terms and relative to the
benchmark.
The new, tiered management fee is expected to further reduce the
annual ongoing charges ratio from its level of 0.85% at end June
2023, continuing the steady reduction in the ongoing charge from
its levels of 1.02% from five years ago.
While China continues to face challenges, it is evident that
many other emerging markets have been doing well, and opportunities
in these markets will remain plentiful. The long-term case for
emerging markets remains robust thanks to superior economic growth,
favourable demographics and the presence of high-quality
companies.
The Company's long-term performance record attests to the
Portfolio Managers' ability to identify the most compelling
opportunities across emerging markets, and to successfully navigate
bouts of market turmoil. The Board is confident that their
experience and expertise will continue to serve shareholders well
going forward."
Austin Forey and John Citron, Portfolio Managers, commented:
"Emerging markets have not had a vintage year. But the overall
outcome would have been significantly more positive had it not been
for the Chinese market, whose decline both masked and offset the
fact that many emerging markets delivered healthy gains over the
year.
Our approach to China will remain cautious, but other emerging
markets offer plenty of opportunities. We are especially optimistic
about India's growth prospects.
We remain committed to a long-term approach because we believe
investment to be a marathon rather than a sprint. We do not know
what the future holds, but we do believe that a consistent process,
implemented with conviction, will always reward investors in the
long run."
Chair's Statement
Performance and Market Background
It has been a privilege to lead your Company in my first year as
Chair of the Board. I would like to begin this statement by
thanking shareholders for their patience, in what has been an
uncertain and volatile time for investors. The Company has not been
immune to this volatility, although it is encouraging that
performance was ahead of the benchmark. For the year ending 30th
June 2023, the net asset value ('NAV') total return was flat, while
total returns to shareholders grew by 0.8%. The Company
outperformed its benchmark index, which fell 2.8%, by 3.6%.
Meanwhile it is pleasing to note that long term performance
continues to be extremely robust, in both outright terms and
relative to the benchmark.
In my half year statement, I noted the improvement in emerging
markets sentiment during the final quarter of 2022, which was
driven by US dollar weakness and by China's decision to abandon its
stringent 'zero Covid' policies. While the dollar has continued to
weaken over the first half of 2023, other developments have been
much less supportive of emerging markets. Importantly, given
China's sizeable position in the emerging market index, the impact
of the country's reopening post Covid has proved much less vigorous
than originally anticipated. The associated weakness in the Chinese
market was a significant drag on the index over the period, as the
Portfolio Managers discuss in detail in their report. Elsewhere,
the US regional banking crisis sparked jitters about the global
financial system, while persistently high inflation forced Central
Banks in developed markets to keep tightening monetary policy, to
the extent that short term US borrowing costs now exceed long-term
bond yields. This so-called 'inverted yield' curve has historically
been a reliable indicator of an economic recession, and concerns
about slower global growth have mounted accordingly.
The Portfolio Managers' report below provides a clear and
insightful review of the market environment, the Company's
performance, portfolio adjustments and the outlook and strategy for
the year ahead.
Purpose and Principles
Recent Annual Report statements highlight that the Company has
maintained and communicated a clear and consistent investment
philosophy and process over time. Such clarity of purpose is even
more important during uncertain times, so before reviewing some of
the Company's key features, I think it is worthwhile reiterating
our core principles:
- the Company's purpose is to achieve superior long-term returns
for shareholders. The Board considers long term to be a period of
at least three to five years and evaluates the Manager on that
basis.
- our Portfolio Managers are predominantly focused on stock
selection, taking a bottom-up approach to finding good businesses
at reasonable prices and owning them for as long as they keep
performing in line with expectations. Typically, these businesses
are well-governed growth companies, with strong 'quality'
credentials, such as robust balance sheets and management teams
with deep experience through different economic cycles.
- high quality research and in-depth knowledge of local markets
are key components of the investment process, as is the intent to
be a responsible and engaged investor in the companies held in the
portfolio.
- given this focus on high-quality growth companies with
sustainable business models, the portfolio will not outperform in
all market conditions and investment styles, and there may be
periods when this approach underperforms the benchmark. However, it
is the Board's firm belief that this strategy will continue to
outperform over the longer term. The Company's average annualised
return over the ten and 20 years ended 30th June 2023 was +7.2% and
+14.0% per annum respectively on a NAV total return basis, both
returns outpacing the benchmark's return of +4.8% and +9.6%
respectively. This is a very creditable performance, delivered over
a wide range of challenging market conditions.
The Portfolio Managers' investment philosophy might thus be best
summarised as basing investment decisions on thorough fundamental
research, maintaining a long-term focus and having the conviction
and patience to remain invested for long periods of time, despite
near-term challenges.
Share Price Rating to NAV per Share
Over the period, the discount at which the Company's shares
trade versus its NAV has narrowed slightly and ended the financial
year at 9.7% (2022: 10.3%). At the time of writing the Company's
shares are trading on a discount of 9 %.
This outcome is comparable with the experience of the Company's
immediate peers, and somewhat more positive versus investment
trusts across differing asset classes. Indeed, the Association of
Investment Companies has recently noted that discounts generally
are at historically wide levels.
The Directors recognise that it is important to shareholders
that the Company's share price does not diverge excessively from
the underlying NAV, and the Board monitors the discount and market
conditions on at least a weekly basis. The Board will consider
buying back shares to manage the level and volatility of the
discount, if it is judged to be in the best interests of
shareholders to do so. In the 12-month review period, the Board
utilised the Company's authority to buy back shares, repurchasing a
total of 19,882,865 shares (1.7% of the issued share capital -
excluding shares held in Treasury - on 1st July 2022). These shares
were purchased at a weighted average discount to NAV of 10.0%,
producing a modest uplift to the NAV for continuing shareholders,
as buybacks increase the net asset value per share. The cost was
GBP21.2 million and in aggregate the buybacks added 0.2% to
performance. A further 3,349,772 shares have been bought back post
the year end.
Revenue and Dividends
Whilst the Company's principal focus is capital growth, the
Board recognises that dividends form a welcome component of total
shareholder returns. Net revenue after taxation for the 12 months
to 30th June 2023 was GBP22.6 million (2022: GBP16.0 million) and
earnings per share were 1.94 pence (2022: 1.36 pence). The
significant increase in revenue was principally due to higher
dividend receipts from around a third of the portfolio's
investments, including some special dividends.
It is important to acknowledge that the level of dividends will
vary year by year, and may fluctuate in line with underlying
earnings, currency movements and changes in the portfolio. That
said, the Board is pleased to be in a position to increase the
total dividend for this year. The Board is proposing a final
dividend of 1.07 pence per share, which, when added to the interim
dividend of 0.58 pence paid in April 2023, amounts to a total
dividend of 1.65 pence per share for the full year. This represents
a 22.2% increase on the total dividend of 1.35 pence paid in 2022
and will be covered by this year's revenues. Subject to approval by
shareholders at the Company's forthcoming Annual General Meeting
('AGM'), the final dividend will be paid on 10th November 2023 to
shareholders on the register at the close of business on 6th
October 2023.
Continuation Vote
Pursuant to the Company's Articles of Association, the Board is
required to put a triennial continuation vote to shareholders. As
the last such vote took place in 2020, a continuation vote will be
put to shareholders at the Company's forthcoming AGM. Given the
long-term performance returns, your Board has no hesitation in
recommending to shareholders that they vote in favour of the
Company continuing as an investment trust for a further three-year
period.
Environmental, Social and Governance Considerations/Task Force
on Climate-related Financial Disclosures
As long-term investors, the Investment Manager has always
integrated sustainability considerations into its assessment of
individual businesses. In the search for sustainable business
models and long-lasting competitive advantages, the Manager is
concerned with the environmental, social and governance ('ESG')
aspects of both current and potential portfolio holdings.
Therefore, whilst the Company is not described as a sustainable
fund, incorporation of these factors is a natural consequence of
its investment process. In this context, it is notable for example
that the profile of the portfolio includes a very low carbon
footprint compared against the benchmark.
Active engagement with investee companies is also an important
part of this process and you will find a series of case studies,
concerning companies held in the portfolio, in the ESG statement
starting on page 28 of the 2023 Annual Report. This report provides
more detail on the Investment Manager's approach as well as
relevant metrics to assess progress, including the Company's proxy
voting record.
As a regulatory requirement for the Company's Manager, on 30th
June 2023, JPMAM published its first UK Task Force on
Climate-related Financial Disclosures ('TCFD') Report for the
Company in respect of the calendar year ended 31st December 2022.
The report discloses estimates of the Company's portfolio
climate-related risks and opportunities according to the Financial
Conduct Authority ('FCA') Environmental, ESG Sourcebook and the
TCFD. The report is available on the Company's website under the
ESG documents section and can be found using this link:
https://am.jpmorgan.com/content/dam/jpm-am-aem/emea/regional/en/regulatory/esg-information/jpm-emerging-markets-inv-trust-plc-fund-tcfd-report-uk-per.pdf.
Board Governance
Having served as a Director since 2015, Richard Laing will
retire from the Board in the first half of 2024. Richard currently
chairs the Audit Committee and he will be succeeded in this role by
Zoe Clements at the conclusion of the Company's forthcoming AGM. On
behalf of the Board and shareholders, I would like to thank Richard
for the very substantial contribution that he has made to the
Company during his tenure, both as an outstanding Audit Chair and
for his wide-ranging expertise as a Director. We wish him all the
best for the future and congratulate Zoe on her new
appointment.
The Board constructs detailed succession plans to ensure it
retains an appropriate balance of skills, experience and knowledge.
To this end, the Board, through the remit of the Nomination
Committee, has appointed Sapphire Partners to assist with the
recruitment of a non-executive director. Following the appointment
of a new director, intended to be announced by the end of 2023, it
is the clear expectation that the Board will meet the new FCA
Listing Rules targets in respect of gender. For more information on
these targets and the Board's explanation of the current position
and future intentions, please refer to page 36 of the Company's
Annual Report & Financial Statements for the year ended 30th
June 2023 ('2023 Annual Report'). In addition and consistent with
previous disclosures, the Board remains committed to the FTSE Women
Leaders Review and its voluntary targets.
The Nomination Committee also conducted a detailed evaluation of
Board and Chair performance which is covered on pages 56 and 57 of
the 2023 Annual Report.
Evaluation of Manager and other Third Party Providers
During the year, the Board, through the remit of the Management
Engagement Committee ('MEC'), undertook a formal review of the
Manager, facilitated by Lintstock, an independent board evaluation
firm. The review covered services provided to the Company including
the Manager's long-term investment performance record, management
processes, investment style, resources, risk control mechanisms and
administration, company secretarial and marketing services.
Following this review, the MEC concluded that overall the Company
is well served by JPMorgan and that the continued appointment of
the Manager, on the terms agreed, is in the interests of
shareholders as a whole. Please refer to page 57 of the 2023 Annual
Report for full details of the MEC's remit.
The Directors also reviewed the other key third party providers,
particularly in terms of quality of service and fees and provided
appropriate feedback on their performance.
Revised Management Fee Arrangements
The Board believes your Company should demonstrably represent
value for money and that shareholders should benefit from the
rewards of scale. To this end, the Board has agreed with the
Manager that, with effect from 1st July 2023, the Company's
management fee should be calculated on a tiered basis of 0.75% per
annum on the first GBP500 million of net assets, 0.65% on net
assets between GBP500 million and GBP1 billion and 0.60% on net
assets in excess of GBP1 billion. This compares with the flat fee
arrangement of 0.75% on net assets which has been levied since 1st
July 2021.
For illustrative purposes, as at 30th June 2023, the Company's
net assets totalled GBP1.33 billion. The Company's current ongoing
charges ratio is 0.85%. However, it is estimated that had this new
fee structure been in place for the year ended 30th June 2023, the
ongoing charges ratio would have been 0.78%, significantly below
the ongoing charges ratio of 1.02% from five years ago. Your
Company's fee arrangements therefore remain extremely competitive
with other comparable managed investment companies and similar
savings products. On behalf of the Board I would like to
acknowledge the Manager's constructive approach in engaging with
this process.
Promotion and Shareholder Communication
As part of the strategy to reach private individual investors,
your Company has invested in a targeted marketing campaign, with
the aim of generating sustained new investor interest and demand.
Shareholders may have already noticed our online advertising
campaigns which should generate demand for the Company's shares, to
the benefit of current shareholders. At the same time, the Company
continues its established investor relations and marketing
programme to wealth managers, institutions and private client
stockbrokers. These initiatives are implemented by JPMorgan but are
regularly reviewed by the Board, both in terms of effectiveness and
cost.
All shareholders, both current and potential, will also find
useful information on the Company's website, including video
content and sponsored research.
The Board and the Manager are keen to increase dialogue with the
Company's existing shareholders wherever possible. Investors
holding shares through online platforms will shortly receive a
letter inviting them to sign up to receive email updates from the
Company. These updates will deliver regular news and views, as well
as the latest performance statistics. Shareholders wishing to
receive these communications can subscribe now by visiting
https://tinyurl.com/JMG-Sign-Up or by scanning the QR code which
can be found on page 14 of the 2023 Annual Report. If at any time
shareholders wish to correspond with the Board directly, they can
do so by contacting the Company Secretary at
invtrusts.cosec@jpmorgan.com .
AGM
The Company's thirty-second AGM will be held at 60 Victoria
Embankment, London EC4Y 0JP on 8th November 2023. Further to
shareholder feedback received at last year's AGM, the meeting will
convene at the earlier time of 2.30 p.m.
Portfolio Managers Austin Forey and John Citron will give a
presentation to shareholders, reviewing the past year and outlining
their view on the outlook for emerging markets for the current
year. The meeting will be followed by afternoon tea, which will
provide shareholders with the opportunity to meet the Directors and
the Portfolio Managers. Shareholders wishing to follow the AGM
proceedings, but who choose not to attend in person will be able to
view them live and ask questions (but not vote) through
conferencing software. Details on how to register, together with
access details, will be available shortly on the Company's website
at www.jpmemergingmarkets.co.u k , or by contacting the Company
Secretary at invtrusts.cosec@jpmorgan.com .
Shareholders who are unable to attend the AGM in person are
strongly encouraged to submit their proxy votes in advance of the
meeting, so that they are registered and recorded at the AGM. If
your shareholding is through the Company's main register, proxy
votes can be lodged in advance of the AGM either by post or
electronically, and detailed instructions are included in the Notes
to the Notice of AGM on pages 99 to 102 of the 2023 Annual Report.
If you hold your shares through an investment platform please refer
to the 'Voting on Company Business and Attending the AGM' section
on page 106 of the 2023 Annual Report.
Outlook
Developments in China were one of the main factors impacting
emerging markets over the past year. With demand for exports
weakening and the heavily indebted property market under severe
pressure, near-term economic growth is likely to remain well below
pre-pandemic levels.
However, it is important to stress that our Portfolio Managers
are focused on the bottom-up fundamentals of the high-quality
businesses that they own or target, and the growth prospects of
those companies over the long-term. Whatever the country's
near-term economic prospects, the Chinese market will still offer
appealing investment opportunities capable of generating excess
returns for the Company's shareholders. Furthermore, while the
Chinese market continues to face challenges over the coming year,
it is evident that many other emerging markets have done well -
inflation pressures are less extreme, their currencies have been
strengthening and companies have performed strongly. Opportunities
in these markets will remain plentiful.
In addition, the long-term case for emerging markets remains
robust - based on superior economic growth, favourable
demographics, increasing consumption and the presence of
high-quality companies and managements.
The Company's long-term record of outright gains and
outperformance is evidence that the Investment Manager's
consistent, disciplined approach has allowed them to identify the
most compelling opportunities across emerging markets, and to
successfully navigate previous bouts of market turmoil and
uncertainty. The Board is confident that their experience and
expertise, alongside the principles set out at the beginning of
this report, will continue to serve shareholders well going
forward.
Aidan Lisser
Chair
26th September 2023
Portfolio Managers' Report
Objectives & Outcomes
Purpose & Approach
The primary purpose of your Company remains unchanged: to
achieve good investment returns for you, its shareholders. As the
Company's Portfolio Managers, we seek to achieve this by taking a
long-term approach to investment, based on fundamental research,
and focused on selecting stocks rather than countries or
industries. We continue to look for high quality corporate
franchises able to compound intrinsic value through economic
cycles, and when we find them we expect to own them for a long
time.
We also strive to be a responsible and engaged investor in the
companies in which your portfolio is invested. As we have explained
in previous years, a long-term approach to investment leads
naturally to a consideration of sustainability in the broadest
sense, and we have always sought to incorporate this in our
investment process. More details on how we think about
sustainability in investment, and on the characteristics your
portfolio exhibits as a result, can be found in our ESG Report on
pages 28 to 33 of the 2023 Annual Report, which also contains
examples of how we analyse and engage with investee companies with
regards to sustainability.
Returns for Shareholders
Emerging market equities have not had a vintage year. Our
benchmark index, which serves as an indication of the overall
results of the asset class, fell 2.8% in sterling terms during the
twelve months to June 2023. Your portfolio fared better than this,
but merely managed to maintain its value, delivering a flat return
on net asset value per share during the year. Beneath these
headline numbers lie a wide range of outcomes in different
countries and indeed between individual stocks. As we explain
later, the overall outcome would have been significantly more
positive had it not been for the results seen in the Chinese
market, whose decline both masked and offset the fact that many
emerging markets delivered healthy positive gains over the
year.
Active Management
As we noted last year, we are active managers and do not expect
to replicate index returns. Rather, by applying a consistent
process as diligently as we can, we seek to enhance them. In this
latest twelve-month period, the Investment Manager Contribution
added 3.5% to your portfolio when compared to the benchmark index
as is set out in the below table.
Performance Attribution - Contributions to Total Returns
Contributions to total returns as at 30th June 2023
12 months to
30th June 2023
% %
--------------------------------- -------- --------
Benchmark Total return -2.8
--------------------------------- -------- --------
Asset allocation 2.1
--------------------------------- -------- --------
Stock selection 4.0
--------------------------------- -------- --------
Currency effect -2.8
--------------------------------- -------- --------
Gearing/Cash 0.2
--------------------------------- -------- --------
Investment Manager contribution 3.5
--------------------------------- -------- --------
Portfolio total return 0.7
--------------------------------- -------- --------
Management Fees/Other Expenses -0.9
--------------------------------- -------- --------
Share Repurchases 0.2
--------------------------------- -------- --------
Return on net assets(APM) 0.0
--------------------------------- -------- --------
Return to shareholders(APM) 0.8
--------------------------------- -------- --------
Source: JPMAM/Morningstar. All figures are on a total return
basis.
Performance attribution analyses how the Company achieved its
recorded performance relative to its benchmark.
(APM) Alternative Performance Measure ('APM').
A list of APMs, with explanations and calculations, and a
glossary of terms are provided on pages 103 to 105 of the 2023
Annual Report.
While we fully understand that shareholders will focus primarily
on the absolute returns they receive, we mention this number for
two reasons. The first is that we as Portfolio Managers determine
this relative performance (often known as 'alpha') with the
decisions that we take. The broader market return (or 'beta') of
course matters to shareholders, but as Portfolio Managers we cannot
influence it. So alpha is the best way to consider whether our
active management of the portfolio is proving worthwhile and
achieving its goal of enhancing returns for shareholders.
The second reason we mention this number is to set it in a
longer-term context. In the 20 years ended 30th June 2023, the
Company generated annualised excess returns of +4.0%. This year, we
added a little less alpha than the long-run average. However, this
serves as a reminder that we cannot produce results which are
totally consistent from year to year. There will be years when we
exceed our average, and others when we undershoot it. As always, we
hope that investors will assess us on the basis of our performance
over the long term, rather than with reference to one specific
year.
The Year and the Portfolio
The Past Year
To observers of and participants in capital markets, every year
feels full of events and fluctuations. But this year has been
especially notable for two reasons. The first is the change,
perhaps a sea change, in global financial markets from an era of
very low inflation and very low interest rates to one in which both
are considerably higher. This shift has, not surprisingly, left
some casualties in its wake, especially in the developed world's
financial sector. If anything we might be surprised that more
businesses have not been upended by such a significant change in
market conditions. The second notable factor which is particularly
important for emerging markets has been the gyrations of the
Chinese equity market and, underneath it, the Chinese economy.
China makes up close to a third of the overall emerging market
index, and to put our earlier comments about its importance in more
context it is worth noting that when one third of the index falls
by 20%, the rest of the index rising by 10% will still leave the
overall return at zero. In simple terms, this is more or less what
happened in the twelve months to June 2023. So further comments
below about China seem appropriate as well.
The Return of Interest Rates
Everybody knows that financial conditions have changed around
the world, with inflation eroding real incomes and higher interest
rates raising the cost of debt. With hindsight it is easy to
understand why this has happened: first, the huge financial
stimulus launched by governments, especially in the West, to
counteract the economic effects of the pandemic had the effect of
increasing the amount of money in circulation sharply. That led
first to a rise in asset prices, including share prices. But after
the Russian invasion of Ukraine the consequent decline in energy
supply to Western economies, in spite of attempts to manage demand,
saw energy prices rise steeply. Those increased costs then passed
through the economic chain and created broader consumer price
inflation, which was in turn met by the conventional monetary
response of higher interest rates in an attempt to slow economic
conditions and thus curb those inflationary pressures. So far, so
unremarkable, you might think. To those who remember economic
cycles in the 1970s and 1980s, this may seem like a normal
pattern, potentially ending in a recession, financial easing and
an eventual recovery.
Refreshingly, central banks in emerging markets mostly responded
well to this cycle, taking quicker and more decisive steps to
contain inflation and moving more quickly through the cycle as a
result. In countries like Brazil and Mexico, an awareness of
inflationary risks and how to deal with them never really faded
during the years since the financial crisis. As one senior Latin
American banker acerbically remarked at the collapse of Silicon
Valley Bank in the USA, 'any junior analyst' from Latin America
would have known how to manage the interest rate risk that
ultimately proved fatal for that institution.
Your Company's portfolio holdings are well positioned to face an
era of higher interest rates.
In the non-financial companies owned in the portfolio, balance
sheets remain strongly financed. While the average company in the
emerging market index has net debt equivalent to a quarter of its
shareholders' funds, the non-financial companies owned in the
portfolio have on average, net cash equal to one tenth of their
equity. Not only does this protect them from higher interest costs,
but their cash generative characteristics mean that they retain
control of their own destiny. The message of Silicon Valley Bank,
and indeed most other corporate failures, is that liquidity and the
ability to draw on cash when needed is the key determinant of
survival or failure through cycles. What of the financial
businesses we own? The first point to make is that higher interest
rates often translate into higher margins for banks, making them
beneficiaries rather than victims of the trend. But much more
important in the long run is the ability to manage credit risk, and
to build capital strength. The banks and other lending businesses
owned in your portfolio exhibit strongly capitalised balance sheets
and a history of profitable operation through past economic cycles,
and we expect a similar outcome in this cycle.
If the underlying businesses owned in the portfolio appear well
able to handle this new era of higher interest rates, we should
also acknowledge that higher rates imply lower valuations for all
financial assets. We comment below on the impact of valuations on
the results of the portfolio over the last year.
China
A lot has happened in the Chinese equity market in the last
year. By the summer of 2022 it was becoming clear that the
government's 'zero Covid' policy was having significant negative
effects on the country's economy. In spite of this, the government
showed little sign of moderating its approach. By the autumn,
demonstrations and protests indicated the depth of public
frustration with the situation, and the stock market decline
accelerated as company results revealed the difficulties businesses
were experiencing. With valuations reaching new lows, the market
began to recover from the beginning of November, and then in
December the government dropped most covid restrictions virtually
overnight. The stock market soared in response. However, after
rising by more than 50% in three months the market in China has
faced more economic challenges in 2023, challenges which lead many
to argue that China's turbo-charged economic growth is now
permanently a thing of the past.
We share that view. China's extraordinary economic growth over
the last three decades has been driven above all by two factors:
huge growth in exports, and a huge increase in fixed asset
investment, especially residential property construction. Neither
of these are currently providing the stimulus that they once did.
On the export front, the weakness of developed world demand is
naturally providing a headwind; at the same time, increasing
geo-political sensitivity has led to direct interventions from
Western governments, especially the USA, to curb China's success in
high tech industries in particular. Meanwhile increased wages have
rendered China less competitive than some other emerging markets,
particularly as a base for labour-intensive manufacturing. It would
be premature to argue that the Chinese export story is over, but it
will clearly have to depend more on higher value-added sectors like
medical equipment or electric vehicles; and even here,
geo-political issues may recur.
Meanwhile the Chinese property sector is in trouble, and has
begun to see large and high-profile bankruptcies. A spectacular
construction boom saw almost the whole housing stock of the country
reconstructed in two decades; but having done this, there is
neither the need nor the demand to do it again. For businesses like
property developers that depend on the flow of construction rather
than the stock of completed buildings, this is bad news. And the
amount of debt attached to this sector makes it a broader economic
challenge for the country. Our expectation is that as the two
principal engines of past economic growth slow, China's GDP will
expand at a much lower rate than in the past, and this in turn will
make life tougher for companies. The winners will be those that
offer a compelling price/value trade-off to customers. Companies
that are earning excess returns without justification will find
life much more difficult.
What does this mean for your portfolio? In any economy the best
companies can still create value for shareholders, and we have seen
before that tough economic environments can often increase the
value of competitive advantage. Our holding in the restaurant
business Yum China increased noticeably in value during the year as
its strong balance sheet allowed it to improve its consumer
proposition at a time when competitors were unable to invest,
something that ultimately translated into higher revenues and
profits for shareholders. More broadly it is worth noting that
China was in fact the largest single contributor to your
portfolio's outperformance of the index during the last year,
driven especially by stock selection within the market. Looking
forward, although we remain cautious about the broader outlook for
the country, we still see opportunities particularly in strongly
positioned businesses able to allocate capital well in a slower
growth environment.
Portfolio Returns
Last year we wrote about the underlying performance of companies
owned in your portfolio, and how this had translated into portfolio
outcomes. The same table that we used last year, updated to reflect
the twelve months to 30th June 2023, looks like this:
12 months to
30th June 2023
---------------------------------- ---------------
Earnings growth (local currency) +7.5%
---------------------------------- ---------------
Dividend yield +2.0%
---------------------------------- ---------------
Valuation change -2.4%
---------------------------------- ---------------
Foreign exchange valuations -7.1%
---------------------------------- ---------------
Total NAV return (GBP) 0.0%
---------------------------------- ---------------
Over the year as a whole, as the table above shows, underlying
earnings from portfolio companies grew by 7.5% in local currency.
However, over the twelve months sterling was relatively strong,
appreciating against the basket of emerging market currencies by
7.1%; a modest decline in valuations offset the dividend component
as well, to leave overall portfolio returns flat. Can we argue that
we are still finding businesses that can keep compounding? For the
most part, yes. If we break down the underlying profit progression
of the companies owned by industry, we see that the financial
companies we own delivered 10% growth in earnings per share; the
consumer companies also saw profits grow 10%, and the technology
companies, where cyclical sensitivity to the broader global economy
is highest, saw earnings fall by 2%. We should not be surprised by
some cyclicality in earnings: a few of the businesses owned in the
portfolio are intrinsically cyclical. Samsung Electronics, for
example, saw its profits decline by 20%. That is not unusual for a
company in a sector like semiconductor manufacturing; yet in past
cycles Samsung has maintained its competitive advantages and
emerged strongly into the next upturn, and we expect the same to
happen in the future. We should bear in mind too that portfolio
earnings growth of 7.5% was considerably better than that achieved
by the asset class as a whole, which saw corporate profits decline
rather than expand over the same period.
In addition, it is worth noting that the dividends paid by the
companies owned in your portfolio rose strongly; income received
from dividends rose by 22% in sterling compared to the previous
financial year. Changes in portfolio weights due to share price
movements account for some of this, as do some special dividends
which should not be seen as recurring; but the overall message that
these dividend increases send is that the companies we own on your
behalf are in good shape and optimistic about the future.
Portfolio Changes
We never start a financial year aiming to change the portfolio
dramatically; rather, we try to react to market conditions when
things become simply too cheap to ignore, or too expensive to
maintain the same position. During the year we added marginally to
some Chinese holdings as their share prices declined, decisions
that looked bad initially, but which certainly helped performance
when the Chinese market rebounded strongly late in 2022. This
included additional purchases of longstanding high conviction names
like Moutai, Netease and Midea.
We also invested for the first time in two new companies in
India, Kotak Mahindra Bank and Cyient, an IT services company
specialising in engineering design.
What Next?
China remains an important market as far as the wider prospects
for emerging markets are concerned. As we write, valuations are
cheap in parts of the Chinese market, and pessimism abounds: that
in itself should make us interested. But at the same time, our
long-held scepticism about the commitment of many Chinese companies
to the optimisation of shareholder value continues to give us
pause. For many years, your portfolio had a lower exposure to China
than the benchmark index, though a combination of additional
investment and relative performance within the market has brought
it closer to the index weight more recently. Going forward our
allocation to the country will continue to be determined firstly by
whether we find businesses with sufficiently wide moats and strong
management teams, and secondly whether we find attractively valued
opportunities within this subset of special businesses.
But elsewhere in emerging markets, plenty of opportunities
remain. Our investments in places like Mexico have prospered over
the last year and serve as a reminder that for all the attention
paid to China in news headlines, in other countries many businesses
have been quietly getting on with what they do best, and seen their
share prices evolve accordingly.
If there is one market that bears more comment, it is India,
which has been one of the most fertile breeding grounds for
precisely the kind of company that we like the most - one managed
for the long term, with strong economics, long duration and
exemplary governance. In India we see two things happening at the
moment. The first is a degree of investor optimism which has pushed
share prices for some companies well above the levels we would be
happy to pay; we have reduced some of our exposure as a result. But
in the real world, India is emerging as one of the few credible
alternatives to China for large scale export manufacturing, and a
round of inward investment adds to reasons to be optimistic about
the future of the Indian economy. The country remains one of our
largest allocations in your portfolio.
While economic conditions matter to companies, growth in
earnings and dividends per share are what matter most to us. The
best companies combine successful operations with judicious
decisions about capital allocation, paying out dividends when they
cannot reinvest at acceptable returns. As an illustration of what
can be achieved, allow us to finish by writing about a company that
we first invested in almost twenty-five years ago, Housing
Development Finance Corporation ('HDFC'). This stock has been a
constant in your portfolio since 1998, but merged with its bank
subsidiary in July this year, and hence no longer appears in your
portfolio in the same form. We first bought the share at around 200
rupees, but subsequent stock splits mean that number should be
divided by 10 to give a price in today's terms of 20 rupees. When
the merger was finally concluded in July 2023, the last share price
for HDFC was 2,724 rupees. How is that possible? The answer is
through the continuous compounding of shareholder value. HDFC's
profits grew 90-fold over 25 years, and its investments in new
areas like banking, asset management and insurance yielded further
gains for shareholders. Its economics remained impressively
constant, with return on equity never falling below 13% in any
year. The point here is a simple one: outstanding management in
front of a big opportunity can, over time, create exceptional
outcomes. Our task is to unearth more companies in the future that
can stand comparison to investments like HDFC.
Closing Thoughts
Knowing what you are trying to do is the most critical thing for
any investor, for two reasons. The first, obviously, is that if you
do not really understand what you are trying to achieve, it is very
unlikely that you will achieve it. But knowing what you are trying
to do has a second equally important function, and that is to
prevent the pressure of market cycles and performance fluctuations
from blowing you off course. It can be very tempting, when share
prices fall or performance is challenging, to go for the quick fix,
to chase performance and do things that you would not do in other
circumstances. As shareholders in this Company, you should neither
expect that from your Portfolio Managers, nor excuse it. We remain
committed to a long-term approach because we believe investment to
be a marathon rather than a sprint. We do not know what the future
holds, but we do believe that a consistent process implemented with
conviction can always reward investors in the long run.
Austin Forey
John Citron
Portfolio Managers
26th September 2023
Principal & Emerging Risks and Uncertainties
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity. The risks identified and the ways in which
they are managed or mitigated are summarised below. With the
assistance of JPMF, the Audit Committee has drawn up a risk matrix,
which identifies the principal risks to the Company. These are
reviewed and discussed on a regular basis by the Board. These risks
fall broadly into the following categories:
Principal risk Description Mitigating activities Movement from prior year
Investment Underperformance Poor implementation of the The Board manages these The risk remains high but
investment strategy, for risks by diversification of unchanged from 2022, due to
example as to thematic investments and through its the continuation of
exposure, sector investment unfavourable economic
allocation, stock restrictions and conditions (caused by
selection, undue guidelines, which are factors such as the
concentration of holdings, monitored and reported on geopolitical crisis between
factor risk exposure or the by the Manager. The Manager Russia and Ukraine,
degree of total portfolio provides the Directors with high inflation and interest
risk, may lead to failure timely and accurate rates) faced by global
to outperform the Company's management information, equity markets, making
benchmark including performance investment decisions
index and peer companies, data and attribution more challenging for the
resulting in the Company's analyses, revenue Portfolio Managers.
shares trading on a wider estimates, liquidity
discount. reports and shareholder
analyses.
The Board monitors the
implementation and results
of the investment process
with the Investment
Manager, whose
representatives attend all
Board meetings, and reviews
data which show statistical
measures of the Company's
risk profile. The Board
holds a separate meeting
devoted to strategy
each year.
---------------------------- ---------------------------- ----------------------------
Geopolitical and Economic Historically, emerging The Manager's investment The risk remains high but
market companies (and process incorporates unchanged from 2022. The
investments in their non-financial measures and Board has increasingly
shares) have shown greater risks in the assessment turned its attentions
volatility and may be of investee companies to to the increased risks from
subject to certain allow the portfolio to investing in China
political, geopolitical and adapt to changing specifically - see below.
corporate governance competitive and political
risks which are not landscapes.
typically associated with The Board regularly reviews
more developed markets and and discusses with the
economies. Sustained Portfolio Managers the
underperformance of portfolio, the Company's
emerging markets as an investment performance and
asset class may occur as a the execution of the
result of risks such investment policy against
as the imposition of the long-term objectives
restrictions on the free of the Company. The
movement of capital or Manager's independent risk
other government regulatory team performs systematic
changes. risk analysis, including
country specific risk
monitoring, as well as
stress testing of the
portfolio's resilience.
---------------------------- ---------------------------- ----------------------------
Investing in China China offers some unique Unlike its passive The risk remains high but
investment opportunities competitors, as an actively unchanged from 2022.
and risks. On one hand, it managed fund the Portfolio The Board specifically
has provided Managers can adapt discusses the risks
faster growth than many the portfolio to a changing associated with investing
other markets in the last regulatory environment and in China at each Board
few decades, but in recent reduce both regulatory risk meeting and received a
years it has from, for presentation from an expert
been impacted by a decline example export controls and in the field at its 2023
in trade, a slowdown in reputational risk from, for Strategy meeting.
consumer spending, a example human rights
crackdown on the private transgressions.
sector by the Chinese The Board has access to a
government and U.S. led range of expert resources
trade restrictions, and strategists both within
together with growing JPMAM and
concerns externally, who can provide
in relation to China's long term insight and
domestic property market. guidance on geopolitical
The country, which together developments.
with Hong Kong, represents
just under 30% of the
Company's benchmark
index and thus represents a
significant proportion of
the Company's portfolio.
The Board and Manager are
aware of the risks
associated with investing
in China but are cognisant
that to not be invested in
China would represent a
significant investment
call, which could
damage investor returns.
---------------------------- ---------------------------- ----------------------------
Loss of Investment Team or A sudden departure of a The Manager takes steps to The risk is medium and
Portfolio Manager portfolio manager or reduce the likelihood of remains unchanged from
several members of the such an event by ensuring 2022. John Citron has been
investment management appropriate a key member of the
team could result in a succession planning and the investment team since 2021.
short-term deterioration in adoption of a team-based The investment team is
investment performance. approach, as well as supported by significant
special efforts resource.
to retain key personnel.
---------------------------- ---------------------------- ----------------------------
Cyber Crime The threat of cyber attack, The information technology The risk remains high but
in all its guises, is controls around the unchanged from 2022.
regarded as at least as physical security of J.P. To date the Manager's cyber
important as more Morgan Chase & Co's security arrangements have
traditional physical data centres, security of proven robust and the
threats to business its networks and security Company has not
continuity and security. of its trading applications been impacted by any cyber
The Board has received the are tested attacks threatening its
cyber security policies for by an independent third operations.
its key third party service party and reported every
providers and JPMF has six months against the AAF
assured Directors Standard.
that the Company benefits
directly or indirectly from
all elements of J.P. Morgan
Chase &
Co's Cyber Security
programme.
---------------------------- ---------------------------- ----------------------------
Discount Control Investment trust shares The Board monitors the The risk remains high but
often trade at discounts to Company's premium/discount unchanged from 2022.
their underlying NAVs; they at which the share price The Board regularly reviews
can also trade trades to NAV on and monitors the Company's
at a premium. Discounts and both an absolute level and objective and investment
premiums can fluctuate relative to its peers and policy and
considerably leading to the wider investment trust strategy, the investment
volatile returns sector. portfolio and its
for shareholders. The Board reviews sector performance, the level of
relative performance and discount/premium to net
sales and marketing asset value at which the
activity (considered shares trade and movements
the primary drivers of the in the share register.
relative discount level). During the year
The Company also has the Company continued to
authority to buy conduct share buybacks.
back its existing shares to
enhance the NAV per share
for remaining shareholders
and to reduce
the absolute level of
discount and discount
volatility.
---------------------------- ---------------------------- ----------------------------
Legal and Regulatory Change The Company's business The Board receives regular The risk remains medium but
model could become reports from its broker, unchanged from 2022.
non-viable as a result of depositary, registrar and Changes to the regulatory
new or revised rules or Manager as well landscape are inevitable.
regulations arising from, as its legal advisers and
for example, policy change the Association of
or financial monitoring Investment Companies on
pressure. changes to regulations
which could impact the
Company and its industry.
The Company monitors events
and relies on
the Manager and its other
key third party providers
to manage this risk by
preparing for any
changes, adverse or
otherwise.
---------------------------- ---------------------------- ----------------------------
Emerging Risks
The Board has considered and kept under review emerging risks,
including but not limited to the impact of climate change,
geopolitical conflict, inflationary pressures, social dislocation
and conflict and technological advances. The key emerging risks
identified are as follows:
Climate change
Investors can no longer ignore the impact that the world's
changing climate will have on their portfolios, with the impact of
climate change on returns now potentially significant. However, the
transition to a low-carbon economy across the globe may also
provide attractive investment opportunities. The Board receives ESG
reports from the Manager on the portfolio and the way ESG
considerations are integrated into the investment decision-making,
so as to mitigate risk at the level of stock selection and
portfolio construction.
Rising competition between China and western economies
Since the end of the Second World War, the world has enjoyed a
technology and economic hegemony with the US at its core. With the
development of China as a political, cultural, technological and
economic rival, there is the risk that alongside the trade tensions
we have seen in recent years, there may develop a rival technology
and economic infrastructure between western economies and China.
The Board notes that in August 2023, the Biden administration
unveiled a new executive order banning certain US investment into
China's quantum computing, advanced chip and artificial
intelligence sectors.
Economic Contraction
A long-term reduction in returns available from investments as a
result of recession, stagnation, inflation or other extended
exogenous factors which may render the Company's investment
objectives and policies unattractive or unachievable.
Artificial Intelligence ('AI')
While it might be deemed a great opportunity and force for good,
there is an increasing risk to business and society more widely
from AI. Advances in computing power means that AI has become a
powerful tool that will impact a huge range of areas and with a
wide range of applications that include the potential to disrupt
and even to harm. In addition the use of AI could be a significant
disrupter to business processes and whole companies leading to
added uncertainty in corporate valuations.
Structural Changes
The attractiveness of investment vehicles, to include investment
trusts, could be impacted by structural changes to the way
investors access the market, including changes within the platform
channels.
Transactions with the Manager and related parties
Details of the management contract are set out in the Directors'
Report on page 52 of the 2023 Annual Report. The management fee
payable to the Manager for the year was GBP10,272,000 (2022:
GBP11,789,000) of which GBPnil (2022: GBPnil) was outstanding at
the year end.
Safe custody fees amounting to GBP497,000 (2022: GBP465,000)
were payable during the year to JPMorgan Chase N.A. of which
GBP212,000 (2022: GBP81,000) was outstanding at the year end.
The Manager may carry out some of its dealing transactions
through group subsidiaries. These transactions are carried out at
arm's length. The commission payable to JPMorgan Securities Limited
for the year was GBPnil (2022: GBP5,000) of which GBPnil (2022:
GBPnil) was outstanding at the year end.
The Company also holds cash in the JPMorgan US Dollar Liquidity
Fund, which is managed by JPMF. At the year end this was valued at
GBP24.1 million (2022: GBP57.2 million). Interest amounting to
GBP2,296,000 (2022: GBP158,000) was received during the year of
which GBPnil (2022: GBPnil) was outstanding at the year end.
Handling charges on dealing transactions amounting to GBP25,000
(2022: GBP49,000) were payable to JPMorgan Chase N.A. during the
year of which GBP6,000 (2022: GBP2,000) was outstanding at the year
end.
At the year end, total cash of GBP737,000 (2022: GBP487,000) was
held with JPMorgan Chase. A net amount of interest of GBP3,497
(2022: GBP220) was receivable by the Company during the year from
JPMorgan Chase of which GBPnil (2022: GBPnil) was outstanding at
the year end.
Full details of Directors' remuneration and shareholdings can be
found on pages 63 to 65 of the 2023 Annual Report.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland' and
applicable law). Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period. In preparing the
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them
consistently;
-- state whether applicable United Kingdom Accounting Standards,
comprising FRS 102, have been followed, subject to any material
departures disclosed and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable
and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
and the Directors confirm that they have done so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements and the Directors' Remuneration Report
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The accounts are published on the Company's website:
www.jpmemergingmarkets.co.uk, which is maintained by the Company's
Manager. The maintenance and integrity of the website maintained by
the Manager is, so far as it relates to the Company, the
responsibility of the Manager. The Directors are responsible for
the maintenance and integrity of the corporate and financial
information on the Company's website. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also
responsible for preparing a Strategic Report, a Directors' Report
and Directors' Remuneration Report that comply with the law and
those regulations.
Each of the Directors, whose names and functions are listed in
Directors' Report confirm that, to the best of their knowledge:
-- the Company's financial statements, which have been prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102
'The Financial Reporting Standard applicable in the UK and Republic
of Ireland', and applicable law), give a true and fair view of the
assets, liabilities, financial position and profit of the Company;
and
-- the Directors' Report includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
The Directors consider that the annual report and accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
For and on behalf of the Board
Aidan Lisser
Chair
26th September 2023
Statement of Comprehensive Income
For the year ended 30th June
2023 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- --------- --------- --------- -------- ---------- ----------
Loss on investments held at fair value through
profit or loss - (10,303) (10,303) - (300,802) (300,802)
Foreign currency (loss)/gains - (2,310) (2,310) - 6,561 6,561
Income from investments 28,130 - 28,130 23,043 - 23,043
Interest receivable 2,299 - 2,299 158 - 158
--------------------------------------------------- --------- --------- --------- -------- ---------- ----------
Gross return/(loss) 30,429 (12,613) 17,816 23,201 (294,241) (271,040)
Management fee (3,082) (7,190) (10,272) (3,537) (8,252) (11,789)
Other administrative expenses (1,456) - (1,456) (1,346) - (1,346)
--------------------------------------------------- --------- --------- --------- -------- ---------- ----------
Net return/(loss) before taxation 25,891 (19,803) 6,088 18,318 (302,493) (284,175)
Taxation (3,294) (4,708) (8,002) (2,326) (5,420) (7,746)
--------------------------------------------------- --------- --------- --------- -------- ---------- ----------
Net return/(loss) after taxation 22,597 (24,511) (1,914) 15,992 (307,913) (291,921)
--------------------------------------------------- --------- --------- --------- -------- ---------- ----------
Return/(loss) per share 1.94p (2.11)p (0.17)p 1.36p (26.13)p (24.77)p
--------------------------------------------------- --------- --------- --------- -------- ---------- ----------
A final dividend of 1.07p (2022: 0.83p) per Ordinary share has
been proposed in respect of the year ended 30th June 2023,
totalling GBP12.3 million (2022: GBP9.7 million).
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the year.
The 'Total' column of this statement is the profit and loss
account of the Company, and the 'Revenue' and 'Capital' columns
represent supplementary information prepared under guidance issued
by the Association of Investment Companies. Net return/(loss) after
taxation represents the profit/(loss) for the year and also Total
Comprehensive Income.
Statement of Changes in Equity
For the year ended 30th June 2023
Called
up Capital
share Share redemption Other Capital Revenue
capital premium reserve reserves reserves(1) reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- ----------- --------- ------------ ----------- ----------
At 30th June 2021 33,091 173,631 1,665 69,939 1,401,743 17,974 1,698,043
Repurchase of shares
into Treasury - - - - (20,890) - (20,890)
Net (loss)/return - - - - (307,913) 15,992 (291,921)
Dividend paid in
the year (note 3) - - - - - (15,926) (15,926)
---------------------- -------- -------- ----------- --------- ------------ ----------- ----------
At 30th June 2022 33,091 173,631 1,665 69,939 1,072,940 18,040 1,369,306
Repurchase of shares
into Treasury - - - - (21,153) - (21,153)
Net (loss)/return - - - - (24,511) 22,597 (1,914)
Dividend paid in
the year (note 3) - - - - - (16,417) (16,417)
---------------------- -------- -------- ----------- --------- ------------ ----------- ----------
At 30th June 2023 33,091 173,631 1,665 69,939 1,027,276 24,220 1,329,822
---------------------- -------- -------- ----------- --------- ------------ ----------- ----------
(1) This reserve forms the distributable reserve of the Company
and is used to fund distributions to investors.
Statement of Financial Position
At 30th June
2023 2022
GBP'000 GBP'000
------------------------------------------------------- ----------- ----------
Fixed assets
Investments held at fair value through profit or loss 1,311,009 1,313,276
------------------------------------------------------- ----------- ----------
Current assets
Debtors 5,074 4,203
Cash and cash equivalents 24,866 57,700
------------------------------------------------------- ----------- ----------
29,940 61,903
Current liabilities
Creditors: amounts falling due within one year (999) (453)
------------------------------------------------------- ----------- ----------
Net current assets 28,941 61,450
------------------------------------------------------- ----------- ----------
Total assets less current liabilities 1,339,950 1,374,726
------------------------------------------------------- ----------- ----------
Non current liabilities
Provision for capital gains tax (10,128) (5,420)
------------------------------------------------------- ----------- ----------
Net assets 1,329,822 1,369,306
------------------------------------------------------- ----------- ----------
Capital and reserves
Called up share capital 33,091 33,091
Share premium 173,631 173,631
Capital redemption reserve 1,665 1,665
Other reserve 69,939 69,939
Capital reserves 1,027,276 1,072,940
Revenue reserve 24,220 18,040
------------------------------------------------------- ----------- ----------
Total shareholders' funds 1,329,822 1,369,306
------------------------------------------------------- ----------- ----------
Net asset value per share 115.6p 117.0p
------------------------------------------------------- ----------- ----------
The Company is registered in England and Wales.
Company registration number: 2618994
Statement of Cash Flows
For the year ended 30th June
2023 2022
GBP'000 GBP'000
---------------------------------------------------------------------- ---------- -----------
Cash flows from operating activities
Net return/(loss) before taxation 6,088 (284,175)
Adjustment for:
Net losses on investments held at fair value through profit or loss 10,303 300,802
Net foreign currency loss/(gains) 2,310 (6,561)
Dividend income (28,130) (23,043)
Interest income (2,299) (158)
Realised gain on foreign exchange transactions 123 163
Realised exchange gains on Liquidity 2,795 1,482
(Increase)/decrease in accrued income and other debtors (15) 11
Increase/(decrease) in accrued expenses 289 (129)
---------------------------------------------------------------------- ---------- -----------
(8,536) (11,608)
---------------------------------------------------------------------- ---------- -----------
Dividends received 23,963 18,579
Interest received 2,299 158
Overseas tax recovered 16 93
---------------------------------------------------------------------- ---------- -----------
Net cash inflow from operating activities 17,742 7,222
---------------------------------------------------------------------- ---------- -----------
Purchases of investments (64,572) (109,362)
Sales of investments 56,540 192,011
Settlement of forward currency contracts - 98
---------------------------------------------------------------------- ---------- -----------
Net cash (outflow)/inflow from investing activities (8,032) 82,747
---------------------------------------------------------------------- ---------- -----------
Dividend paid (16,417) (15,926)
Repurchase of shares into Treasury (20,899) (21,670)
---------------------------------------------------------------------- ---------- -----------
Net cash outflow from financing activities (37,316) (37,596)
---------------------------------------------------------------------- ---------- -----------
(Decrease)/increase in cash and cash equivalents (27,606) 52,373
---------------------------------------------------------------------- ---------- -----------
Cash and cash equivalents at start of year 57,700 510
Unrealised (loss)/gain on foreign currency cash and cash equivalents (5,228) 4,817
---------------------------------------------------------------------- ---------- -----------
Cash and cash equivalents at end of year 24,866 57,700
---------------------------------------------------------------------- ---------- -----------
Cash and cash equivalents consist of:
Cash and short term deposits 737 487
Cash held in JPMorgan US Dollar Liquidity Fund 24,129 57,213
---------------------------------------------------------------------- ---------- -----------
Total 24,866 57,700
---------------------------------------------------------------------- ---------- -----------
The presentation of the Cash Flow Statement, as permitted under
FRS102, has been changed so as to present the 'reconciliation of
net return before finance costs and taxation' to 'cash inflow from
operating activities' on the face of the Cash Flow Statement.
Previously, this was shown by way of note to the Cash Flow
Statement. Other than consequential changes in the presentation of
certain cash flow items, there is no change to the cash flows as
presented in previous periods.
Reconciliation of net cash
As at Other non-cash As at
30th June 2022 Cash flows charges 30th June 2023
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------------- ----------- --------------- ---------------
Cash and cash equivalents
Cash 487 254 (4) 737
Cash equivalents 57,213 (27,860) (5,224) 24,129
--------------------------- --------------- ----------- --------------- ---------------
Net cash 57,700 (27,606) (5,228) 24,866
--------------------------- --------------- ----------- --------------- ---------------
Notes to the Financial Statements
For the year ended 30th June 2023
1. Accounting policies
(a) Basis of accounting
The financial statements are prepared under the historical cost
convention, modified to include fixed asset investments at fair
value, and in accordance with the Companies Act 2006, United
Kingdom Generally Accepted Accounting Practice ('UK GAAP'),
including FRS 102 'The Financial Reporting Standard applicable in
the UK and Republic of Ireland' and with the Statement of
Recommended Practice 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' (the 'SORP') issued by the
Association of Investment Companies in July 2022.
All of the Company's operations are of a continuing nature.
The Directors believe that having considered the Company's
investment objective, risk management policies, capital management
policies and procedures, the nature of the portfolio and
expenditure projections, the Company has adequate resources, an
appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the
foreseeable future. The Board has also taken into account the fact
that the Company has a continuation vote to be considered by
shareholders at the Company's 2023 Annual General Meeting and the
likelihood of shareholders voting in favour of continuation. Having
consulted the Company's major shareholders through the remit of its
advisers, the Directors have a reasonable belief that the
continuation vote will be supported by the majority of
shareholders. For these reasons, they consider that there is
reasonable evidence to continue to adopt the going concern basis in
preparing the financial statements. They have not identified any
material uncertainties to the Company's ability to continue to do
so over a period of at least twelve months from the date of these
financial statements.
The policies applied in these financial statements are
consistent with those applied in the preceding year.
2. Return/(loss) per share
2023 2022
GBP'000 GBP'000
------------------------------------------------------------ -------------- --------------
Revenue return 22,597 15,992
Capital loss (24,511) (307,913)
------------------------------------------------------------ -------------- --------------
Total loss (1,914) (291,921)
------------------------------------------------------------ -------------- --------------
Weighted average number of shares in issue during the year 1,162,832,611 1,178,582,565
Revenue return per share 1.94p 1.36p
Capital loss per share (2.11)p (26.13)p
------------------------------------------------------------ -------------- --------------
Total loss per share (0.17)p (24.77)p
------------------------------------------------------------ -------------- --------------
3. Dividends
(a) Dividends paid and proposed
2023 2022
GBP'000 GBP'000
-------------------------------------------------------------- -------- --------
Distributions paid
Unclaimed dividends refunded to the Company - (1)
2022 final dividend of 0.83p (2021: 0.83p) per share 9,683 9,813
2023 interim dividend of 0.58p (2022: 0.52p) per share 6,734 6,114
-------------------------------------------------------------- -------- --------
Total dividends paid in the year 16,417 15,926
-------------------------------------------------------------- -------- --------
Distributions proposed
-------------------------------------------------------------- -------- --------
2023 nal dividend proposed of 1.07 p (2022: 0.83p) per share 12,312 9,715
-------------------------------------------------------------- -------- --------
All dividends paid and proposed in the year have been funded
from the revenue reserve.
The dividend proposed in respect of the year ended 30th June
2023 is subject to shareholder approval at the forthcoming Annual
General Meeting. In accordance with the accounting policy of the
Company, this dividend will be reflected in the financial
statements for the year ending 30th June 2024.
(b) Dividend for the purposes of Section 1158 of the Corporation
Tax Act 2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of
the dividend proposed in respect of the financial year, shown
below.
The revenue available for distribution by way of dividend for
the year is GBP22,597,000 (2022: GBP15,992,000). The revenue
reserve after payment of the final dividend will amount to
GBP11,908,000 (2022: GBP8,323,000).
2023 2022
GBP'000 GBP'000
--------------------------------------------------------------- -------- --------
2023 interim dividend of 0.58p (2022: 0.52p) per share 6,734 6,114
2023 final dividend proposed of 1.07p (2022: 0.83p) per share 12,312 9,715
--------------------------------------------------------------- -------- --------
19,046 15,829
--------------------------------------------------------------- -------- --------
4. Net asset value per share
2023 2022
--------------------------- -------------- --------------
Net assets (GBP'000) 1,329,822 1,369,306
Number of shares in issue 1,150,629,365 1,170,512,230
--------------------------- -------------- --------------
Net asset value per share 115.6p 117.0p
--------------------------- -------------- --------------
5. Status of results announcement
2022 Financial Information
The figures and financial information for 2022 are extracted
from the Annual Report and Accounts for the year ended 30th June
2022 and do not constitute the statutory accounts for the year. The
Annual Report and Accounts include the Report of the Independent
Auditors which is unqualified and does not contain a statement
under either section 498(2) or section 498(3) of the Companies Act
2006. The Annual Report and Accounts will be delivered to the
Register of Companies in due course.
2023 Financial Information
The Figures and financial information for 2023 are extracted
from the published Annual Report and Accounts for the year ended
30th June 2022 and do not constitute the statutory accounts for
that year. The Annual Report and Accounts has been delivered to the
Registrar of Companies and included the Report of the Independent
Auditors which was unqualified and did not contain a statement
under either section 498(2) or section 498(3) of the Companies Act
2006.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
27th September 2023
For further information:
Alison Vincent,
JPMorgan Funds Limited
0800 20 40 20 or +44 1268 44 44 70
ENDS
A copy of the 2023 Annual Report will shortly be submitted to
the FCA's National Storage Mechanism and will be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The 2023 Annual Report will shortly be available on the
Company's website at www.jpmemergingmarkets.co.uk where up-to-date
information on the Company, including daily NAV and share prices,
factsheets and portfolio information can also be found.
Stay Informed
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occasional news and views, as well as performance updates, you can
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JPMORGAN FUNDS LIMITED
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END
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(END) Dow Jones Newswires
September 27, 2023 02:00 ET (06:00 GMT)
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